A calculation of a firm’s cost of capital in which each category of capital is proportionately weighted. All capital sources – common stock, preferred stock, bonds and any other long-term debt – are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.

Q3. Two companies are identical in all respects except in the debt equity profile. Company X has 14% debentures worth Rs. 25,00,000 whereas company Y does not have any debt. Both companies earn 20% before interest and taxes on their total assets of Rs. 50,00,000. Assuming a tax rate of 40%, and cost of equity capital to be 22%, find out the value of the companies X and Y using NOI approach? Hint: use the formula K0 = [B/(B+S)]Kd + [S/(B+S)]Ke

* Critical assumption is ko remains constant. * An increase in cheaper debt funds is exactly offset by an increase in the required rate of return on equity. * As long as ki is constant, ke is a linear function of the debt-to-equity ratio. Thus, there is no one optimal capital structure

Q4. Examine the importance of capital budgeting.

Answer: Capital budgeting decisions are the most important decisions in corporate financial management. These decisions make or mar a business organization. These decisions commit a firm to invest its current funds in the operating assets (i.e. long-term assets) with the hope of employing them most efficiently to generate a series of cash flows in future. These decisions could be grouped into: • Decision to replace the equipments for maintenance of current level of business or decisions aiming at cost reductions, known as replacement decisions • Decisions on expenditure for increasing the present operating level or expansion through improved network of distribution • Decisions for production of new goods or rendering of new services • Decisions on penetrating into new geographical area

• Decisions to comply with the regulatory structure affecting the operations of the company, like investments in assets to comply with the conditions imposed by Environmental Protection Act • Decisions on investment to build township for providing residential accommodation to employees working in a manufacturing plant The reasons that make the capital budgeting decisions most crucial for finance managers are: • These decisions involve large outlay of funds in anticipation of cash flows in future For example, investment in plant and machinery. The economic life of such assets has long periods. The projections of cash flows anticipated involve forecasts of many financial variables. The most crucial variable is the sales forecast. • For example, Metal Box spent large sums of money on expansion of its production facilities based on its own sales forecast. During this period, huge investments in R & D in packaging industry brought about new packaging medium totally replacing metal as an important component of packing boxes. At the end of the expansion Metal Box...

...SECTION- A (Reading)
1. Read the passage and answer the questions that follow. (06 x ½=03)
Hibernation is one of the main adjustments that allow certain northern animals to survive in long winters, cold winters. Hibernation is like a very deep sleep that allows animals to save their energy when there is little or no food available. The body functions of ‘true hibernators’ go through several changes while they are hibernating. The body temperature drops and the heart rate...

...IMMANUEL MAR THOMA CENTRAL SCHOOL,ERAVIPEROOR
SECOND TERM EXAMINATION 2012
Std:X11 COMPUTER SCIENCE Time:3hrs
Marks:70
Q1.Answer the following:
a)What is a network and its advantages? 2
b)Name the header files that shall be needed for the successfully execution of following code: 2...

...MODEL QUESTIONPAPER B.E. Aeronautical Engineering Semester V AE334 - PROPULSION I Time: 3 Hours Answer All Questions PART – A (10 x 2 = 20 Marks) 1. Bring out any two essential difference between aircraft piston engines and jet engines from operating principle point of view. 2. 3. Mention any two advantages and two limitations of a turbojet powered airplane? What is the effect of increase in air temperature during compression process on the overall...

...
Q.1 A] Read the given stanzas carefully and answer the questions based on them [08]
Once upon a midnight dreary,
Fingers cramped and vision bleary,
System manuals piled high
And wasted paper on the floor,
Longing for the warmth of bedsheets :
Still I sat here doing spreadsheets:
Having reached the bottom line,
I took a floppy from the drawer.
Typing with a steady hand,
I then invoked the “save” command
But got instead a...

... In 1997, the board of management restructured and integrated the Mercedes-Benz Group into Daimler-Benz. Consequently, Mercedes-Benz's chief, Helmut Werner, who had been given credit for a successful model policy, resigned from the company.
Questions:
1) What is your assessment of Daimler-Benz's operations in many different fields?
2) Should the various groups operate autonomously? What kinds of activities should be centralized?
3) Daimler-Benz is best known for its...